Gold Futures Creep Ahead

Ambiguous news on the housing market and official statements out of China regarding its foreign reserves gave gold a minor boost Tuesday.

Contracts for April delivery of bullion added $4.70 to close at $659 an ounce on the Comex division of the Nymex. The bullion exchange-traded funds that hold inventories of the metal, streetTracks Gold Shares(GLD Quote) and iShares Comex Gold Trust (IAU Quote), were up 0.8% and 0.5% recently.

The Commerce Department reported a bigger-than-forecast jump in housing starts for February, following particularly poor figures in January. At the same time, the number of new permits issued fell more than expected and perhaps augur further weakness ahead.

Bullion traders bid up bullion prices on the news in anticipation of renewed investor interest, which tends to rise on the prospect of economic turmoil.

"People have very serious jitters about the housing market," says Axel Merk, manager of the (MERKX Quote)Merk Hard Currency Fund. "But they have put off any big reaction until the Federal Reserve releases its policy statement Wednesday."

Also giving a boost to the gold bulls was widely reported news that China would stop accumulating foreign reserves such as U.S. dollars, according to the governor of the country's central bank, Zhou Xiaochuan. The country's official hoard of foreign cash now tops $1 trillion.

"The bank's reserves rise sharply each month because they hold interest-yielding securities, so I'm not sure how it will arrange for its reserves not to go up," says Meg Browne, a currency strategist at Brown Brothers Harriman in New York, noting that sometimes official comments aren't always translated effectively.